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Wednesday, May 10, 2017

Admist the Usual Austerity there are some Welcome Surprises in this 2017
Morrison Federal Budget. Though the monopoly mass media is tending to
overstate any perceived 'leftward shift' ; inappropriately using
terms like 'Labor lite' , where in reality there are very significant assaults
on the rights of students and job seekers.

by Dr Tristan Ewins, 10/5/2017

Many media commentators are responding to the 2107-18 Morrison Federal
Budget by branding it as ‘Labor Lite’ or ‘worse’. But how much of that
actually stands up to scrutiny?

Yes the Government is attempting to appear ‘fair’. And many
media figures are throwing around terms like “cash splash” which are commonly
reserved to use against Labor governments. There are pressures in the
right-wing monopoly mass media for a ‘right-turn’ in response to any moderation
of economic policy under Turnbull. Bernardi’s ‘Australian
Conservatives’ and the libertarian ‘Liberal Democrats’ stand to gain most from
this. But despite years of conditioning from the monopoly mass media Australians
may resist these trends given the remnants of our ‘egalitarian spirit’.
The point of all this appears to be stigmatisation of social
investments and expenditure ; ultimately leading to a US-style political
culture. Which in turn would support a US style class system based on the
absolute destitution of many , and the blatant exploitation of a class of
working poor. To the extent Turnbull and Morrison resist pressures for an
‘economic hard right turn’ then that is welcome.

Some Budget changes do appear at the least superficially ‘Labor-esque’.
Many of the billions in cuts and savings originally proposed in the
nightmare 2014 Hockey Federal Budget are laid to rest permanently here. The
increase to the Medicare Levy will be welcomed by many, and will help provide
for the NDIS. (National Disability Insurance Scheme) The Government
claims a ‘$56 billion shortfall’ for the NDIS ; though most of that could have
been made up for immediately by jettisoning the Government’s $50 billion in
planned corporate tax cuts over 10 years. (much more over time) $8.2
billion will be taken via the Medicare Levy increase over the first four years.

A so-called ‘Google tax’ targeting corporate tax evasion is also
expected to net more
than $3 billion over four years. (though it is quite insignificant
compared with corporate tax cuts elsewhere)

Further, the ‘big banks’ (including CBA, ANZ, Westpac, NAB) will be hit
for $6 billion over 4 years ; apparently including an effective payment in
return for the ‘government guarantee’ for the sector. (which began with Rudd’s
response to the Global Financial Crisis) In response there is the
question : will the banks hit customers or will they hit shareholders? If
somehow larger shareholders could be targeted that would ensure the most
equitable outcomes. A payment by the big banks in return for an effective
government insurance policy makes sense. Without it ultimately there
could be impositions on workers, citizens, tax-payers. So on this front
at least the Government is doing the right thing. And if the Banks
respond by upping fees and charges arguably the co-operative and mutualist
sector could ‘step into the breach’. Were the Commonwealth Bank
still in public hands then assuming a ‘competitive charter’ it could have held
the rest of the sector accountable , countering tendencies to pass costs onto
consumers. That’s also a good reason for Labor to consider restoring a
public-sector bank – perhaps taking advantage of existing Australia-Post
infrastructure.

Meanwhile, foreign home owners who leave properties vacant six months or
more will be taxed – a measure apparently borrowed from the Andrews Labor State
Government in Victoria. As well as raising some revenue, this measure
should also influence investor behaviour ; and effectively increase available
housing supply ; with downwards pressure on housing and rental
affordability.

The ‘Gonski
2.0’ measures, meanwhile, are a significant improvement on past Liberal policy, and
include needs-based funding. David Gonski is due to present another
report by the end of the year. The Catholic sector appears to be in the
firing line. More broadly, Shorten points out that despite the
gains, here, (including some cuts to some of the richest private schools) the
proposals nonetheless still involve an overall $22 billion cut to the sector
over ten years compared with the deals previously negotiated by Labor.

Other constructive policies include significant tax breaks for ‘empty
nesters’ to ‘downshift’ to smaller, lower-maintenance accommodation. That
could also increase effective housing supply. The housing bubble will
eventually deflate (or ‘burst’ disastrously). But government could step into
the economic breach with public housing. There is still the need to
expand supply to meet underlying human need. Planned Negative Gearing and
Capital Gains Tax reforms from the Government are welcome, but do not go
anywhere near far enough, saving just $1.6 billion over 4 years . Stronger
action on Negative Gearing is necessary to lessen competition between first
home buyers and investors , correcting the Housing Bubble over time.

Also there’s $10 billion for rail as part of a suite of infrastructure
commitments. (though these are not as significant as some think when compared
relative to infrastructure investment under a ‘traditional’ Labor Government)

A once-off payment of $75 for singles, $125 for couples – to assist with
energy costs – is very insignificant when you consider the rising cost of
living. The Liberals point to renewable energy as the alleged ‘culprit’
here ; but what of privatisation?

Finally ; Annual TV Licenses are scrapped in favour of a much lower ‘spectrum fee’ –
which makes sense given the changing media landscape – which is hurting
traditional media. Arguably the licenses aren’t worth as much anymore.
But diluting media ownership laws will still enable the likes of Murdoch
to dominate traditional media.

The Down-Side

But there’s a very significant ‘down-side’ to this Budget as well ;
including ‘traditionally Liberal’ attacks on vulnerable groups ; and treating
tertiary students like ‘cash-cows’.

Higher Education stands to lose almost $3 billion a year – with students
hit hardest. The Turnbull Federal Liberal Government claims that its fee
increases – and its reduction in the minimum repayment threshold to $42,000 a
year (down from $55,000) “better reflects the lifetime benefits reaped by
higher education graduates”. But these measures will start ‘kicking in’
affecting people on approximately half the average wage. Hence in places
the measures really bear no relation to any alleged private financial benefits
for students. The logic behind these measures also neglects entirely the gains
by business and society at large from a more highly educated
populace. There is some
progressivity as those with much higher incomes will repay at a significantly
higher rate. But this does not excuse or make up for a 7.5% average
increase in tuition fees. In response Labor needs to raise the threshold
somewhere much closer to the average wage ; and higher over time ; while
entrenching a progressive scale in the rate of repayments.
Exceptional groups such as the disabled should probably be forgiven their
debts, here : or at least have them frozen. The inevitable effect of this will
be to deter many poorer students from study, reducing the nation’s pool of
‘human capital’ over time, and impacting on ‘equal educational
opportunity’. It is dubious at best to consider educational investments a
‘bad debt’.

The 0.5 per cent increase in the Medicare Levy is supposed to reassure
voters that Labor’s warnings on health are only a ‘scare campaign’. But
while the Levy is re-indexed the forsaken increases to Medicare’s coverage in
recent years are not made up for. Medicare might still be eroded by
stealth ; and that is ‘de-facto privatisation’ in the sense of intermittently
eroding the coverage of ‘socialised’ public health proportionately. This
was always what Labor alluded to , but for some reasons ‘the waters were always
muddied’ in the mass media, with throw away lines like ‘Mediscare’.

Also , while the Medicare Levy is rising, the 2 per cent Deficit Levy is gone –
directly benefiting the wealthy in the final balance. There are ‘traditionally
Liberal’ distributive outcomes, here, despite claims of the Budget being
‘Labor Lite’. (that is, the Budget favours the wealthy)

Payroll tax on foreign workers will also be replaced with a levy of
$1500 to $5000 per employee raising $1.2 billion over four years “to improve
Australian workers’ skills”. To an extent this will take some of the wind
from Labor’s sails on related issues.

Other measures include punitive attacks on the rights of the
unemployed, with the threat of payment suspension for those who miss a job
interview or refuse a job offer they don’t want. And reversion to a
‘cashless welfare card’ for anyone found to have illegal drugs in their
system. 5000 people will by thus tested – and effectively humiliated – in
order to create a ‘Trojan Horse’ for the introduction of cashless welfare.
Already Australia has one of the most negligent and punitive
unemployment benefit regimes in the advanced capitalist world. But
‘cashless welfare’ will see Australia revert to Depression era ‘Susso’ style
‘payments’. The ‘Susso’ basically provided threadbare material
subsistence (rations and vouchers) for the long-term unemployed.

Conclusions

Claims to the effect this Budget is ‘Labor Lite’ do not really stand up
in the longer view historically when you consider pre-1980s relativities on the
Economy ; and more recently with the ‘relative economic centrism’ of former
Liberal leaders like John Hewson. The reality is ‘convergence’ on right-wing,
economically Liberal policies ; though Shorten has begun to ‘break away’ to
something more recognisably ‘left of centre’. Ironically, the “Abbott
Purists” will likely claim the austerity has not gone far enough. Though they
may be upset by the attacks on Catholic education. But it is THEY who
have abandoned ‘traditional Catholic Centrism’ on welfare, labour and the
economy. (a tradition which interestingly had parallels with other
‘Christian Democratic’ parties in Europe)

This government is restrained by its own inflexible “small government no matter
what” Ideology. (spending is set at no more than 26 per cent of GDP ;
well below the OECD average) This drives various ‘cuts to the bone’ (as
Gillard would have put it) , because it leaves no other option than harsh
austerity. Ultimately, Scott Morrison will have to make a choice: real
people or Economically Liberal ‘small government’ Ideology.

Terry McCrann of the Herald-Sun calls the Budget ‘a disgrace’ for not
sufficiently addressing government debt. And Jeff Whalley (also of the
Herald-Sun) argues that government debt amounts to “$375 billion” or “$15300
for each man, woman and child” . But while government spending can
have a positive ‘multiplier effect’ on economic activity, austerity also
has a negative multiplier effect ; dragging the broader economy down in
sympathy.

Also we must remember that private household debt is the much
bigger problem, and is connected with falling real wages. (Why the cuts
in Penalty Rates, therefore, we might ask! ; which will lead to lower tax
revenue also) And reducing investment in PUBLIC owned infrastructure
presents its own associated problems of passing inferior cost-structures on the
broader economy. Indeed, investments in some services (eg: Education) and
infrastructure add to productivity – and the public sector (natural public
monopolies) can often do the job more efficiently. So Morrison’s ‘good
debt’ and ‘bad debt’ has some substance. (a pity in the past they did not apply
those principles to Labor governments!)

In conclusion ; The Herald-Sun reports with an air of alarm that
taxes will be up $23 billion over four years ; and spending up $15.7 billion
over four years. Indeed, Commentators are complaining that income
tax is becoming more significant proportionately. Though really, this
need not be a problem if total income tax is progressively
restructured, and also the rest of the taxation mix. Also
keep in mind the economy is worth approximately $1.6 trillion. So in
reality spending is up by less than a quarter of one per cent of GDP. The revenue gap has at least been appreciably narrowed.

In some ways this
Budget is better than we might have expected from the Liberals after the horror
Hockey ‘Lifters and Leaners’ Budget from 2014. But a lot of that Ideology is
still there. And the cuts are still significant ; with the introduction
of ‘cashless welfare’ setting a precedent for the further future humiliation of
job-seekers. And shutting many lower-income Australians out from Higher
Education. An Opposition with strong, traditional Labor policies on
distributive justice can still ‘outflank’ a Liberal Government which cannot
help but govern primarily in the interests of its core constituency: the
unambiguously well-off.

THE RED FLAG IS STILL FLYING HERE

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About Me

Tristan's areas of expertise include Australian and world politics, social theory, education, history, and computer gaming for PC. He considers himself a liberal, and also a socialist, but has also referred to himself as a left social democrat. He says such - conscious that there was once a time when 'social democracy' and 'socialism' were synonymous. Furthermore, Tristan is a long-time member of the Australian Labor Party - specifically its Socialist Left wing. He is also involved in the Australian Fabian Society. Tristan has written for many publications - including a stint freelancing for 'The Canberra Times': the daily broadsheet of the Australian Capital. Tristan's Personal Homepage is here: http://sites.google.com/site/tristanewinsfreelancewriter